Sarah Henry, Portfolio Manager at Logan Capital, joined Closing Bell to look ahead to 2023 on the markets, including whether the U.S. economy will see a significant slowdown in the new year.

Looking Ahead to a New Year on Wall Street

let's turn back to the major indexes joining me now is Sarah Henry portfolio manager at Logan capital and investment advisory firm. Sarah thanks so much for coming on the show here. Unfortunately, we've got a down day in the market, but again, pretty consistent with what we've been seeing in 2022. What's your take on the recent market action? So pretty interesting here. I mean, the last days of the year appeared to be making even heavier bets on trends that have played out in 2022, namely a flight to quality, a focus on enduring an invisible and visible earnings and a real return to fundamentals-based investing. So, last month, in part particular, we saw high quality stocks outperforming low quality stocks by nearly 500 basis points. And that was significant because november was a positive market rally. So, high quality stocks actually outperformed by a lot, which is going against the grain of the high growth narrative of the past decade. So of course, um as you mentioned there, um and I think you're right, it's, you know what we've been seeing this week into year end kind of is consistent with what we've been seeing throughout 2022. But what about 2023 I mean, is there any hope for people looking ahead planning for the future? What this new year might bring that the stock market can turn around? Sure. So we're generally construe active on the market. We see a lot of positive dynamics. We see the year ending with modestly positive GDP growth, but definitely we continue to be selective. We believe companies that are showing strong fundamental signals specifically that have continued to raise their annual dividend and return cash to shareholders. Which is a strong signal Of their ability to press competitive advantages in what may be a slowing economic backdrop. So recently coming out of the holiday season we've gotten some data points. Um more recently mastercard um this week reported retail sales growth of almost 8%. Um but interestingly the composition of those sales Were looking different than in the past certainly than in the period over COVID where restaurants grew um double the rate at 15%. So it's sort of emphasizing that consumers are turning away from goods and making big expenditures to more experiential spending. Um so we can expect that to continue. Yeah I think focusing your right on those memories after it's technically still a pandemic right? And um being cooped up inside I think for a good portion of these past few years Sarah you mentioned there cos obviously raising their dividend those look attractive kind of more defensive plays but still stocks as we head into 2023 are there specific stocks as a portfolio manager that you're looking to buy or that you're bullish on? So we heard from Nike just a couple of weeks ago and that's definitely a stock who's reporting schedule puts them a bit ahead of everyone else and they were able to deliver earnings growth far above expectations. Um And it was not a big surprise that growth came to the top line for them because they had a big um clearance event, but they more surprisingly delivered better than expected margins, which meant that they had made more sales at full price. So that was um, you know, even the narrative around that stock uh in the call contained indications of a really engaged consumer that's being lit up by innovation following the World Cup. And again, you know, this is not usually thought of a defensive stock, but um, you know, it does have that rising dividend history. They do buy back stock, um and they are very responsible steward of capital, generally speaking. Well, let's talk about china of course, because that was, I think kind of a wild card, I guess if you will, that did serve as an impetus for a lot of the stock market losses that we saw this year, of course, with that four week long lockdown in shanghai impacting more than 20 million people in the global supply chain toward late winter, early spring of this year. With china now starting to relax some of these covid restrictions, Sarah, what does that mean? Potentially for business and that's the stock market in the new year. So it's a little bit of a bucking bronco here, as we've seen today, china is significant, not only because they remain um, a percentage of these multinationals that have made long live bets on china um for consumption, but also because it's significant part of the supply chain and the region around it. So um you know, china is going to remain important, not just two companies investing in china but to the market overall. Um I think it is bullish that they have indicated that they would reopen borders starting january 8th. Um This should throughout the remaining supply chain issues obviously we've heard today um some more caution related to movement across borders, but this is a different world that we are now in with with the prevalence of vaccines, 80% of people in Italy, for example, are vaccinated. So um I think this is a different covid cycle than in the past and the importance even from the Nike call is clear on china and the commitment as well. Alright, Sarah Henry, portfolio manager at Logan capital and investment advisory firm Sarah, thank you.